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Bob Lutz, chairman of GM's struggling North American operations, called health care costs "a huge albatross hanging over American industry today." He was in New York for the auto show.GM pitches health care cuts
Automaker: UAW benefits are too rich
GM pitches health care cuts
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Cowger
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NEW YORK -- General Motors Corp., buckling under massive health care costs, signaled Wednesday it will push union workers to pay significantly more for medical coverage.
GM's top two executives in North America, speaking at the New York auto show and on Wall Street, said health care for United Auto Workers needs to be more in line with the coverage GM provides salaried workers.
"The UAW hourly health care is way, way richer" than GM salaried workers' medical coverage, said Bob Lutz, chairman of GM North America, at an investment conference. "We've got to get to the point where all of our employees, hourly and salaried and the UAW, have the same health care contract. ... That would mean huge sums of money for us."
The automaker expects to spend $5.6 billion -- about $1,600 a vehicle -- on health care this year, far more than Toyota Motor Corp., Honda Motor Co. and other foreign rivals.
GM said its 38,000 U.S. salaried workers paid 27 percent of their total health care costs last year, while the company's 119,000 U.S. hourly workers, largely covered by the UAW union contracts, paid 7 percent.
The average U.S. corporate employee pays 32 percent of the cost of his or her health care, GM said.
Lutz also said the company could "phase out" brands such as Pontiac and Buick if they fail to improve sales. "I hope we don't have to do that," he said. "What we've got to do is keep the brands we've got."
Given GM's financial problems, many workers are beginning to see more out-of-pocket health costs as inevitable.
"Everything's rolling downhill, and it's going to land on us," said Vito Leone, a 43-year-old assembly line worker at GM's Detroit-Hamtramck Assembly plant.
GM said it is in discussions with the UAW about health care, but drastic changes are unlikely before the two sides renegotiate their master labor agreement in 2007.
The union has vigorously opposed attempts to shift health care costs to its members in the past. But UAW President Ron Gettelfinger said in a statement this week that the union recognizes "rising health care costs are a serious problem for working families and many of their employers."
The union is working closely with automakers to control health care costs while maintaining quality, but the best solution is national health care reform, Gettelfinger said.
GM jolted the markets last week by forecasting sharply lower 2005 profits. The automaker cannot sustain its current health care costs, Gary Cowger, president of GM's North American operations, said Wednesday at the New York auto show.
"We need an across-the-board, competitive health care plan for salaried and hourly workers that could serve us better," Cowger said. "Moving forward at the present state is simply not feasible."
Lutz, speaking separately at a Morgan Stanley investor conference in New York, called health care costs "a huge albatross hanging over American industry today."
GM could try to follow the lead of DaimlerChrysler AG's Chrysler group, which is instituting modest deductibles for 35,000 union-represented workers and retirees enrolled in a PPO health care plan.
Chrysler was able to make the move without breaking open its national labor contract with the UAW, which also comes up for renewal in 2007. The Auburn Hills automaker took advantage of a clause in the contract permitting it to shift some health care expenses to workers when costs become "unreasonable." The UAW agreed to the change after several months of talks.
Like Chrysler, GM has provisions in its contract with the union allowing it to seek relief from rising health care costs without formally reopening the contract, Cowger said.
"There are things in the contract that we can do within the confines called enabling language," he said. "We are continually in conversation with the UAW."
GM Chairman Rick Wagoner will address UAW officials during an annual meeting next month to outline the company's financial challenges, particularly health care expenses.
Fay Lord, a 55-year-old worker at the Hamtramck plant, doesn't expect to avoid monthly healthcare premiums for long.
"I don't like it," she said. "But, at the same time, I know my son-in-law makes as much as I do and he has to pay out of pocket for health care. Most people do."
UAW workers at GM do not pay monthly premiums for health care, while GM has required salaried employees to do so since the early 1990s.
But those perks have come at a cost, employees say, in the form of concessions on pay, vacation time and increased co-payments for doctor visits.
"We pay our fair share," said John Clabon, 59, a GM worker for 28 years.
He blames GM's money troubles on poor management and a lack of innovation to spur sales. Clabon pointed to his 1999 Buick LeSabre in the parking lot of the Hamtramck plant.
"The cars I'm building today look exactly the same," he said.
Detroit automakers must ask employees to shoulder more health care costs if they're to survive, said Paul Ginsburg, president of the Center for Studying Health System Change.
"Automakers are becoming aware of what's the norm throughout the country," he said.
Unions are losing out on pay raises by fighting for the status quo on health care, he said. "They're recognizing what it's costing them in terms of wage increases," he said.
Riley Holman, 81, a longtime union worker at GM's Pontiac validation center, says he's part of an unpopular minority who believes workers should chip in more.
"The employees have got to help the company," said Holman, whose family has worked for GM for 75 years. "All of us are going to have to bite the bullet, from Rick Wagoner all the way through the management and through the hourly work force."
Detroit News Staff Writer Christine Tierney contributed to this report. You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.
Fay Lord, who works at GM's Detroit-Hamtramck Assembly plant, doesn't expect to avoid monthly health care premiums for long. "I don't like it," she says.
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